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The Rise of Universal Paid Search

Google does not make money from organic search. It’s simply content they need to monetize like any publisher.

As with all publishers, their goal is to maximize revenue by:

Increasing market share

Improving user loyalty and product usage

Monetizing users more effectively

In the past few years, Google has made significant improvements in the relevance of their organic search results (content) by introducing Universal Search – the integration of new types of content such as video and product listings directly into search results.

While those changes occurred, PPC ads have largely remained text only. It’s possible that as universal search has gone mainstream, clicks on paid search ads may have suffered. Something had to give.

These changes largely fall under Google’s AdWords New Ad Formats Initiative. When I was at SES Chicago, I asked Devin Sandoz, Product Marketing Manager for AdWords, about the guiding principles behind the initiative. He pointed to the evolution of organic search results as the model for the initiative.

Google is playing with the visual balance between organic and paid search to balance user satisfaction and the average revenue per click/SERP. Any combination of images, videos, PlusBoxes, icons, product listings and multiple text ad links can now appear mixed in with paid search ads.

And this is only the beginning.

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2010: The Year of Universal Paid Search

2010 will be the year of what I’m naming Universal Paid Search – the evolution of online advertising served to searchers on Google and across the web.

Universal Paid Search will be driven by 4 major trends:

Increased Ad Diversity

Moving Beyond Clickthrough Rate

Personalized Text Ads

Search Retargeting with Display

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Increased Ad Diversity

Text ads will continue to dominate most search results. However, we’ll see a greater percentage of SERPs with new ad formats and ad extensions blended into text ads, specifically:

Product listings ads

Product listing extensions

Comparative Ads

Ad sitelinks

The conditions that trigger comparative ad and ad sitelinks are somewhat limited. It’s more likely, then, that product listing ads and extensions will be the first step in increased ad diversity.

Click to Enlarge

New ad formats are more disruptive than ad extensions, so I expect that Google be more liberal with their beta tests for ad extensions. These often come in the form of their PlusBox. For example, rich media ads were introduced to the Content Network through the PlusBox earlier this year. As this analysis shows, the presence of PlusBox does increase clickthrough rates.

Click to Enlarge

I wouldn’t be surprised if we see video ads wade into the waters through the PlusBox. They’ve already tested these out in the entertainment area. PlusBox could also help recoup some of the massive drop in search spending within the pharmaceutical industry by adding a place for fair balance.

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Moving Beyond Clickthrough Rate

Universal Paid Search isn’t just about new ads, it’s also about new calls-to-action/conversion events and monetization models for Google.

Google is increasingly trying to move the customer experience from advertisers’ sites to the search results or other areas of Google.com. For example, Google is introducing ad formats to monetize ambiguous but high volume head terms in the loan industry with Comparative Ads. These ads lead users to a page where users give additional information about their query and advertisers pay if the user clicks through. These formats currently appear on a limited basis:

“At this time, Comparison Ads will only show to a small number of users in select U.S. states and is only available to a limited number of advertisers in the mortgage/refinance space. Over time, we’ll increase the number of users who see Comparison Ads offers as well as the number of advertisers able to participate”

Click to Enlarge

Other lead generation business models are probably within their sights. Similarly, new ad extensions are offering alternative actions for more specific queries:

Form Extensions Beta allows users to fill out a form right on the SERP if the ad is in the preferred position (#1 spot above organic listings). Advertisers are charged the Max CPC for submissions.Click to Enlarge

As text ad change, so will the way Google serves them to individual users. Earlier this year personalized search moved mainstream with the decision to extend it to users who weren’t signed into Google.

That announcement was limited to organic search. When Google implements personalized results in organic search, they can measure the impact to customer satisfaction more directly and advertisers don’t really have a say in the process.

A similar evolution in search ads will occur, with some users more likely to see different ads or types of ads based on past interaction with search ads. However, paid search is much more complicated. Advertisers want to be target, measure and optimize variations in how their ads appear.

We’re already seeing personalized search ads with session based retargeting for broad match (here, here and here). Notably, Google introduced the feature, then reporting and still hasn’t given advertisers the explicit ability to opt into or out of this kind of advanced ad serving (with the exception of search query reports and negatives).

I expect Google will move most cautiously into personalized paid search and follow the same feature -> reporting -> control model.

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Search Retargeting with Display

Perhaps the biggest trend in Universal Paid Search isn’t about SERPs at all – Google’s move into display. In case you missed it, Google is putting a big emphasis on display in 2010:

“Our display business will give advertisers the opportunity to reach people with visual stories and narratives that they couldn’t with search-ad text,” Mr. Schmidt said on a call with analysts.

“We’ve been saying for a while that display is a big opportunity. One story you haven’t seen so far is how successful we’ve been in display, but that will come out in 2010.” (AllThingsD)

Display is an enormous component of online advertising spend and critical to Google’s continued revenue growth. Today, AdWords and display coexist primarily in the content network where advertisers can place image (and some rich media) through contextual targeting.

That model started to change when Google introduced behavioral targeting for audiences based on “interests” on the content network.

Google wants to monetize non-Google properties with their AdWords model of self-service and real-time bidding. They can accomplish this at scale through the eventual merging of AdSense and the Double Click Advertising Exchange.

There will be a mid-to-long term learning curve to get traditional performance advertisers who use search to migrate some of their budget to display whenever that integration occurs. Search retargeting, which I’m defining in this case as reaching people who’ve already visited your site from search with display ads, will bridge that gap in the short term. This isn’t news to search advertisers, since Yahoo already offers this feature.

The walls that divide search and display (and their budgets) will fall as the technology, data and training advance.

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Grappling with Universal Paid Search

Universal Paid Search will introduce more complexity and competition than ever before. Traditionally search exclusive advertisers and agencies are likely to be face pressure to test new advertising options and explore ways to integrate display into the mix.

I suggest you make friends with your Google rep to get advanced notice and access to betas. Prepare yourselves; it’s going to be a bumpy ride.Alex Cohen is the Senior Marketing Manager at ClickEquations, a complete pay per click software platform for large advertisers and agencies.

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Google’s move in to site based retargeting is definitely a power play, but it is a service that they already provided on a much higher scale. A more interesting play would be find a service that plugs in to Google’s content, and other sources to provide a more holistic retargeting campaign.